Truemors
A round up of bad news in the various newspapers from the last few days. Things are getting worse here - even though the US economy is attempting to post a few spotty positive reports.
In an interview with German daily Bild on Monday, Aug 4, the head of the Munich-based Ifo Institute for Economic Research, Kai Carstensen warned that the mood among businesses was grim.
"Companies' expectations for the next six months are terribly bad," Carstensen said.
Though order books are full right now, there are no new orders, Carstensen warned.
"The upturn will definitely be over in winter. Many companies will gradually start cutting back on production and also lay off staff."
The newspaper reported that German companies rated their order situation to be the worst in two years.
Germany's engineering and electronics employer group, Gesamtmetall also voiced worries about the effects of a cooling global economy.
"The global economic slowdown is increasingly affecting the metal and electronics industry," Gesamtmetall President Martin Kannegiesser told Bild. "In many companies, there's enough work to last only until the end of the year."
As an example of this -
Aug 1, 2008
The German luxury car maker BMW joined rival Daimler on Friday in warning it would miss its 2008 targets, a sign that high-end manufacturers have been caught by the international financial crisis.
BMW said it could not give a full-year outlook after its first-half pre-tax profit fell by 35 percent in the first six months of the year to €1.24 billion ($1.93 billion).
Net profit fell by 26 percent to €994 million.
Chairman Norbert Reithofer provided no precisions during a telephone news conference early in the day.
Last week, Daimler and its Mercedes brand cut its full-year profit forecast to "more than €7 billion," from a previous outlook slightly above €7.7 billion, owing to slumping auto markets.
The companies are still making money but profits have fallen sharply.
"It is already a bad sign," said Ferdinand Dudenhoeffer, a German auto specialist.
"And 2009 is going to be very tough too," he told AFP.
Other European car makers such as Fiat, Peugeot and Volkswagen have fare better with cheaper cars, but high-end German models depend on the US market where financial conditions have taken a serious turn for the worse.
In addition, Inflation here continues going up. estimates for June was 4% month over month. They're saying July is looking similar....
Aug 1,2008
Increasing Risk of Recession
Meanwhile, this Thursday the euro zone reported 4.1 percent inflation for the month of July, up from 4 percent in June and representing the highest level of rising costs registered since the European Union began gathering such statistics for the euro-zone in 1997. The European Central Bank's preferred target for inflation is 2 percent.
Rising prices and a related shrinking of consumer demand are increasing the risk of a recession in the area where Europe's common currency, the euro, is used.
As a result of all these factors -
Analysts have already begun reversing downward their growth projections for Europe's largest economy.
The German Finance Ministry said last week that German gross domestic product (GDP) shrank considerably in the second quarter after a strong start to the year, when Europe's largest economy expanded at its fastest rate since 1996.
German business daily Handelsblatt said that based on a survey of 10 leading German and international banks and research institutes, big German companies will have to reckon with shrinking profits this year. Hopes that Europe could isolate itself from the economic crisis in the US have evaporated, the paper said.
Instead, current forecasts show that both economic growth and rise in profits in the euro zone in 2008 may be slower than in the US, the paper said.
The experts surveyed by the paper expect growth of just 0.9 percent in the euro zone for next year as against 1.5 percent in 2008 and 2.7 percent in 2007. In June, the European Central Bank had forecast a growth rate of 1.5 percent for the euro zone in 2009.
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